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To say that the past year has been a tumultuous one for master limited partnerships (MLP) would be an understatement. The Alerian MLP Index has given up almost 33 percent of its value over the past 12 months, a painful loss that reflects a combination of headwinds, including concerns about volumetric and counterparty risk as well as forced liquidations by funds and selling for tax losses. (See On Midstream Counterparty Risk and The Risks as We See Them.)

Offshore contract drillers such as SeaDrill Partners and Transocean Partners LLC (RIGP) must contend with customers pushing to renegotiate contracts. Fixtures in this industry also tend to involved shorter terms (three to five years), creating significant renewal risk. And these partnerships’ elevated costs of equity capital make additional asset acquisitions a challenge. SeaDrill (SDRL) and Transocean (RIG) also face their own financial challenges that likely will constrain them from stepping up to support the MLPs under their auspices. Hi-Crush Partners (HCLP) and Emerge Energy Services (EMES) have suffered from reduced drilling activity, an oversupply of silica sand and customers seeking price breaks.

Investors should also continue to avoid the 49 sell-rated master limited partnerships in our MLP Ratings table, all of which face deteriorating business fundamentals. Earlier this month, we also highlighted a number of names within this group that appear to be at an elevated risk of cutting their distributions in the near term. (See MLP Madness.)

In addition to eroding investors’ returns, the indiscriminate selling in the MLP space has increased the Alerian MLP Index’s yield to more than 8.4 percent. Meanwhile, 59 of the publicly traded partnerships tracked in our MLP Ratings yield more than 10 percent, usually an indication that the distribution could be at risk.